Your customer-relationship-management (CRM) and sales-force-automation (SFA) systems have been in place for over a decade, and your marketing group relies heavily on analytics from the marketing automation system you implemented a few years ago. As an IT professional, are you feeling that your sales and marketing groups should be “set” for a while?
If so, think again. The next big initiative in sales and marketing technology, channel data management (CDM), is advancing rapidly, with cutting-edge early adopters already reaping measurable results.
CDM is the tool that enables your sales and marketing people to increase their visibility into your indirect sales channels—the business done by your distributors and reseller network.
Average revenue growth driven by CDM is 5 percent across managed channels, and error rates are typically reduced by 98 percent within 90 days of implementation. There is a 15 percent reduction in incentive overpayments, and on-hand channel inventory requirements are lowered by more than 50 percent.
With the decisive advantages CDM confers, manufacturers that have not yet implemented CDM systems will be forced to do so in the next two years, or risk being dramatically outsold in the increasingly important B2B technology channel. The following is what IT people should know about channel data management.
How CDM Enables the “New Smart Channel”
Partner and reseller indirect sales channels were traditionally managed by instinct, experience and data gathered informally from channel partners who were more concerned about closing deals than reporting sales data to their vendors. With channel-sales organizations able to rely on getting data only monthly or even quarterly (rather than weekly or daily), their insights were based solely on past performance.
“Manufacturers building more-complex networks of distributors and dealers have not had the benefit of deep visibility into indirect channels, resulting in a lack of knowledge of their customers, poor end-to-end visibility to channel sales and inventory, and inaccurate sales compensation and partner incentive models,” explained Ted Dimbero, Chief Customer Officer of Zyme, a leading cloud-based CDM solutions developer.
Timely, accurate data became one of the biggest channel-management limitations manufacturers faced, a limitation exacerbated by an increasingly dynamic sales environment. Taking advantage of advances in analytics and cloud technology that allow for easier data collection and reporting in a global environment, CDM addresses that limitation by delivering real-time information and dynamic insights that lead to smarter channel-management decisions.
Most companies focus almost exclusively on the top 20 percent of their resellers—potentially neglecting the opportunity to increase sales by developing up-and-coming resellers. But, “By compiling more accurate and in-depth data from the entire long tail of the sales channel, as opposed to just the top sellers, CDM solutions enable manufacturers to increase sales by identifying hidden opportunities, and gain a better understanding of where incentives and marketing programs are paying the best dividends. This is particularly important in emerging markets where visibility can be the most difficult,” Dimbero added.
Manufacturing companies with a CDM solution in place can track information on the customers buying their products, which enables them to improve promotions, market segmentation, and product development. Without a CDM solution, most companies receive only the information channel partners are willing to share. As a result, they are left with only half the information they need – they know who is selling what, but they do not know to whom.
CDM provides more granular data. Without a robust data collection and standardization infrastructure, it’s simply infeasible to collect store- or reseller-level data. With store-level inventory data, product companies get real-time information that enables them to optimize inventory—avoiding both stock-outs and inventory write-offs due to excess on hand.
Selecting a CDM Solution
As sales and marketing departments rush to implement CDM solutions to keep up with competitors, how can you separate the facts from the hype, and implement a solution that meets your business users’ needs?
To get the full value of a CDM implementation, a best-of-breed solution should meet most of the following requirements.
- Flexible partner connectivity. A world-class CDM platform should enable partners to send data in any format (EDI, flat files, RosettNet, Excel, etc.) using any transfer protocol they prefer. This flexibility maximizes partner adoption, which ensures sales and marketing are working with a full complement of data—not just data from top partners.
- Data validation. File and field-level data validation based on a standard data model and predefined business rules are critical for ensuring completeness and accuracy, without which data cannot be effectively consolidated and analyzed.
- Partner compliance. Any sound CDM solution should put partner compliance at the forefront, with data reporting best-practice recommendations for contracts and a proven methodology for tracking and improving partner compliance for data quality, timeliness and completeness.
- Proprietary and third-party content. A global partner and customer directory is required to accurately identify partners and customers and assign transactions. Adding third-party content enriches data analysis with demographic or geographic information.
- Purpose-built analytics. Prebuilt analyses incorporating channel-management best practices enable manufacturers to track an innovative set of metrics to better manage their channel.
- Global reach. For a CDM solution to be effective, it must gather data not just from the top partners in developed markets, but also from channel partners worldwide.
In selecting a solution, although it’s important to meet business users’ needs, sales and marketing departments purchasing cloud-based solutions might overlook performance and security requirements. Work with business users to explain the importance of the following solution elements.
- Availability. Look for a clear, rigorous SLA.
- Unlimited scalability. How is the CDM solution architected? The ideal solution will have a multi-tenant, cloud-based architecture so that when the vendor adds new customers, users are not negatively affected.
- Industry leading performance. Does the vendor track and continuously improve metrics such as application performance (e.g., page load time)? How about operational metrics such as file turnaround time?
- Information security. With sensitive sales data being collected and stored, make sure the vendor you select has a documented, audited, multilayer security system in place.
- Business continuity and disaster recovery. Look for clear, well-documented plans that undergo regular assessment, testing and audits.
Case Study: Measurable ROI from CDM
A well-known manufacturer of data-storage hardware had a goal of increasing market share and profitability. As one of its channel managers put it, “Our management and sales teams needed insights into the size of each of our geographies as well as the sales trends, so we could determine the market share we want to capture, not just for our top markets, but for emerging markets as well”.
“It was a real challenge, because, since our data collection was largely manual, we rarely had the data we needed for a thorough analysis, and what we had was fraught with errors. We were basically relying on intuition and gut instinct,” he added.
To add insult to injury, the company was able to track only on their highest-volume customers. Faced with the challenges of collecting, aggregating and standardizing this point-of-sale on their own, in a timely enough manner to support accurate ad hoc reporting, the company implemented a cloud-based channel-data-management system.
“CDM has enabled our channel sales team to back up their assumptions with accurate and current channel data. It has also allowed them to concentrate more on the entire customer base, as opposed to just our top customers. There is still an intuitive element to our assumptions, but we can back them up with accurate, concrete data,” the manager said.
The company has found that CDM helps them better identify the partners they want to incentivize on the basis of sales volume.
“Before we implemented CDM, our POS data was not as clean as we needed it to be. For instance, there was a case where we had two distributors within a particular country selling to the same customer,” the managed revealed. “The first partner would describe that customer one way, and the second partner described them a different way. In order to incentivize partners based on accurate sales volumes, we needed to track that customer as one entity, not two. With CDM, we can do that in a way we would not have been able to before.”
Not Just for Sales and Marketing
Although sales and marketing departments are likely to initiate a CDM-solution purchase, IT professionals will find that once the data is available, a large number of data consumers across the enterprise will request access to it. This includes people in finance, compliance and risk management, supply-chain planning, market planning, service-contract renewals, channel sales, incentive-program management, and elsewhere.
Finance professionals require channel sales data to recognize revenue and estimate reserves, supply-chain professionals require it to optimize inventory management, and service professionals use it to support timely service-contract renewals.
As other innovations such as the Internet of Things (IoT) become more widespread and the number of IoT devices grows, the need for CDM as a mechanism for tracking channel sales renewals and upgrades of these products is expected to explode.
IT professionals should identify their organizations’ need for CDM by working with business users in sales and marketing to understand their needs and identify benefits and tradeoffs a solution can bring to the table, both now and in the future.